The early spring payouts for holiday allowance funds have now been underway for three weeks. The result is as expected – a great many people have applied for payouts. In three weeks, DKK 31.6 billion has been paid out, which, after the Danish Tax Agency, has left employees with DKK 18.9 billion to spend.
Following the early payouts in the autumn, 77 per cent of employees ended up receiving their holiday allowance. This group of employees therefore has only two weeks’ holiday allowance left at the time of the early spring payouts, which can be spent. Taking this into account, the holiday allowance funds are being spent at the same rate as in the autumn.
It is not easy to assess how quickly the holiday allowance funds are spent, but Danske Bank has reported that on the last working day before Easter, turnover via Dankort and MobilePay reached a record high. On that day, DKK 15.6 billion was deposited into private customers’ bank accounts as a result of payouts for holiday allowance funds.
The savings will remain in place
Last autumn, 600,000 employees chose to leave their holiday allowance in their accounts as additional savings for retirement. Given the trends we have seen so far, there is reason to believe that this group will continue to opt for saving rather than payouts. This group includes a high proportion of employees with substantial savings, who are therefore at risk of negative interest rates on their bank accounts if they opt for payouts. The savings rate is high in Denmark. Many also come up against the legal limits on how much one is allowed to contribute to pension schemes. Frozen holiday allowance is effectively an additional retirement savings pot, subject to low tax on returns and without any offset against the state pension. It can therefore be difficult to find reasons to withdraw holiday allowance funds, unless you have a specific desire to use them right now.
The fact that a group of wage earners leave their holiday allowance funds in their accounts as savings is not considered to have any particular impact on consumption. This is presumably a group that generally has more than enough to cover their day-to-day spending, and which nevertheless eats out when the opportunity arises.
The figures below show the payouts made in spring 2021 compared with those made in autumn 2020.
The figure above shows the cumulative amount requested for payouts, day by day, following the opening of the scheme for early payouts in autumn 2020 and spring 2021. In the autumn, the scheme opened for payouts on 29 September 2020. In the spring, it opened on 24 March 2021. It typically takes 2–3 days from the time payouts are requested until the money appears in your bank account. For a small group, it may take longer. Approximately 90% pay income tax on these payouts. The amounts shown here are before tax has been deducted.
The dotted line shows the expected level of payouts, taking into account that the vast majority have already received three weeks’ holiday allowance funds in the autumn and therefore only have two weeks’ holiday allowance funds remaining to be paid out in spring 2021. A net return has been added to the current payouts.
The figure above shows the number of payouts requested, day by day, following the opening of the scheme for early withdrawal of holiday allowance funds in autumn 2020 and spring 2021. In autumn 2020, almost 75 per cent of total payouts were requested within the first five days. At first glance, we are seeing the same pattern this time around.
